Merck R&D Head Bets Slashing Bureaucracy Will Unlock Innovation

Matthew Herper
,
Forbes Staff
I cover science and medicine, and believe this is biology's century.

Roger Perlmutter

When
Merck scientist Chris Hill won an award from the American Chemical Society for creating the molecule that become the AIDS drug Isentress, he claimed that it is harder to bring a new drug to market than to put a man on the moon. Hearing of the comment on Twitter, James Love, who has campaigned tirelessly to make medicines available to people who need them, called the comment “stupid” and “part of ongoing effort by Merck to justify high prices on new drugs.”

If so, it goes right to the top. Roger Perlmutter, who took over Merck's research labs five months ago and has been charged with bringing them from good back to great, echoes the sentiment. Putting a man on the moon, he tells me, is an engineering exercise. “Isaac Newton knew the calculations. Whereas, if we're discovering drugs, the problem is that we just don't know enough. We really understand very little about human physiology. We don't know how the machine works, so it's not a surprise that when it's broken, we don't know how to fix it. The fact that we ever make a drug that gives favorable effects is a bloody miracle because it's very difficult to understand what went wrong.”

Quite a statement from a guy charged with spending $8 billion a year to invent medicines that will help patients and make shareholders money. But Perlmutter says that it holds true even when we look at medicine's stalwarts. Statin drugs like Merck's own Zocor, Lipitor, and Crestor have been shown in big clinical trials to prevent heart attacks and strokes. How? The original theory was that they blocked an enzyme called HmG-co-reductase, the key step in making cholesterol in the body. But then it turned out they boosted the activity of receptors that suck cholesterol away. But statins don't so much prevent the buildup of cholesterol plaque as keep it from rupturing, causing heart attacks. So now many researchers believe statins lower inflammation.

“Who knows?” says Perlmutter. “I don't have any idea and yet we've been using [statins] for 20 years. The ideas are not new, they're 35 years old. We still don't know how they work. How does Tylenol work? I don't have a clue. I have no idea and nobody else does either.”

So how does Perlmutter, who will be among the speakers at Forbes' second annual Healthcare Summit on Oct. 10, plan to ramp up Merck's R&D engine? In a wide-ranging interview last week, he talked about making a big bet that by eliminating bureaucracy, removing layers of management, and setting a tone that encourages, instead of prevents, risk-taking, he could change the character of the labs for the better.

“What I always loved about Merck was there was this reservoir of technical expertise,” he says. “Fine chemistry reaches its apotheosis at Merck. I used to say if I could just scrape off the top five layers of management, including myself, it would just get better. And that technical reserve, that content expertise remains very much in evidence.”

In July, Merck announced that it was stripping layers of senior management out of its research labs, letting go executives including Roger Pomerantz, the well-known microbiologist who had previously run Merck's anti-viral drug research – an area Perlmutter himself says is a strong suit for the company. The problem, Perlmutter says, was that the labs had becoming tied up in bureaucracy, with too many people reporting to other people reporting to other people, all of them asking each other for permission slips.

“What happens in any company as it grows is there's a tendency to increase your bureaucracy and to narrow the scope of peoples' jobs,” says Perlmutter. “People refer to this as swim lanes. Everybody stay in their swim lanes. I'm actually interested in people who want to own the pool.”

One result is that too many people can become risk-averse, not making big enough bets in a business that is built on risk and mystery. “I've said to people that my feeling is that if you're a manager in our organization, not every day or every week, but every now and then, I expect you to bet your job. I expect you to come into me and say, 'I'll bet my job that this is right and we ought to be doing this.' People should be prepared to do that,” Perlmutter says. He says people were quite surprised when he stood up and said that in front of the organization. “I've said,you know, if you're not prepared to bet your job, why are you here? Because if all you're going to do is manage in the traditional way, I don't really need you here. I need people who are prepared to change the world.”